Tax Rules for Buying and Selling Cryptocurrency

Cryptocurrencies like Bitcoin, Ethereum, and others are treated as assets, not currencies, in most countries.
That means tax rules apply whenever you buy, sell, trade, or earn crypto — just like stocks or real estate.

⚖️ 1. When Crypto Becomes Taxable

You don’t pay tax just for buying cryptocurrency.
Tax applies when you dispose of it — meaning you sell, trade, or spend it.

2. Types of Taxes on Cryptocurrency

A. Capital Gains Tax (CGT)

You pay CGT when you sell or exchange crypto for more than you bought it.

Example:

• You bought 1 BTC for $120,000.

• You sold it later for $130,000.

• Capital gain = $10,000.

That $10,000 is taxable.

Short-term vs Long-term:

• Short-term gains: Sold within 12 months → taxed at your regular income rate.

• Long-term gains: Held >12 months → may get a reduced rate or exemption (depending on country).

B. Income Tax

You pay income tax if you earn cryptocurrency:

• As payment for work or services

• Through mining, staking, or airdrops

The value (in your local currency) at the time you receive it is your taxable income.

3. Tips for Compliance

✅ Keep detailed transaction records.
✅ Use crypto tax software (e.g., CoinTracking, Koinly, or CoinLedger).
✅ Report even small crypto transactions honestly.
✅ Consult a tax professional — especially if trading frequently or earning crypto income.